All good things must come to an end. And that goes for growth rates in early-stage fast-moving industry segments. After growing from a small base and reaching a larger stature, mathematical and practical principles set in, and things slow down a bit. Will this be the case with the red-hot retail media space?
WARC seems to think so. The research firm expects retail media revenue – measured in brand dollars spent with retail media networks – to grow at a faster rate this year, but then cool down next year. Specifically, spending will grow 13.7 percent this year to 153 billion, before decelerating to 10.6 percent.
Before continuing, what is retail media? For those unfamiliar, it’s when retailers become outlets for brand advertising. They do this by utilizing all the high-intent and lower-funnel activity in and around their stores for various flavors of product promotion. That can include product demos, digital display ads, etc.
Retail media benefits include revenue diversification for retailers while integrating advertising in places that are contextually natural – near products themselves. These attributes have caused the space to grow to 200+ retail media networks globally, as Microsoft’s retail media lead told Localogy recently.
Atoms & Bits
Back to the WARC data, the deceleration in retail media revenue growth is to be expected, but that doesn’t mean that the sector is in trouble. In fact, the investments projected for this year signal robust levels of retailer optimism. And investment is happening throughout the retail media network lifecycle.
Put another way, some media networks are still getting off the ground, while others are well established but expanding. An example of the latter is Walmart, which recently made a $2.3 billion investment in Vizio to extend its retail media network to the living rooms of 18 million Vizio smart TV users.
That last part represents a key trend in retail media: offsite monetization. Though premium inventory lies in the store aisle for all the reasons noted above, that only scales so far. Additional inventory can be unlocked in retailers’ various online channels. A healthy mix of atoms and bits is the name of the game.
Speaking of bits, the dominant player in retail media isn’t a physical retailer at all. Amazon leads with a 37.3 percent market share, measured by revenue from ad placements. Amazon is considered to be in the retail media space with the broad definition of offering first-party ad inventory where products are sold.
Non-endemic
Another growth avenue for retail media networks will be opening the doors to non-endemic advertising. That’s a fancy way of saying products that a given retailer doesn’t carry on its shelves. This could unlock opportunities for several other sources of ad revenue that are complimentary to retail products.
In fact, Walmart went down this road recently, as did Amazon. And the most notable aspect of these moves is their SMB angle. Specifically, these non-endemic moves unlock retail media for categories of local businesses that could benefit from advertising in big-box stores, alongside related products.
The most obvious example is home services. There are contextually-relevant opportunities for local home service pros to establish ad placement in and around fitting product categories at your local Home Depot (think: plumbers, electricians, etc.) or Auto Zone (think: mechanics or auto dealerships).
This opportunity is just getting off the ground and a few players in the Localogyverse have jumped on board. For example, Hibu and Tiger Pistol are among the few in Amazon’s pilot program for its first-party display ad network. We got to catch up with Tiger Pistol last week and will have more on that soon.
